Legence Corp. (LGN): A Bull Case Theory

Core Thesis - Legence Corp. (LGN) presents a compelling investment opportunity driven by its rapidly growing data center business and strong organic growth metrics [2][3][5] Company Overview - Legence Corp. provides engineering, installation, and maintenance services for mission-critical systems in buildings across the United States, with a focus on energy efficiency and consulting [2] - Approximately 50% of its pro-forma business is concentrated in data centers, which experienced over 60% year-over-year growth in Q3 2025 [3] Financial Performance - Total order intake exceeded $1 billion in Q3, reflecting a more than 40% year-over-year increase, while quarterly revenue growth accelerated from 8% in Q1 to 26% in Q3 [3] - The engineering and consulting segment generates high margins (~30%), complementing mid-teens margins in installation and maintenance, which together constitute 70% of the business [3] Valuation and Market Position - LGN trades at approximately 12x 2026 pro-forma EBITDA, significantly below peer multiples ranging from 14x to 20x, despite its strong growth trajectory [4] - The company benefits from Blackstone ownership, providing preferred access to major data center investments and supporting nationwide infrastructure expansion [4] Growth Outlook - Management projects ~15% organic top- and bottom-line growth in 2026, which appears conservative given recent performance [4] - Upside scenarios include a potential re-rating to peer multiples, which could result in a ~50% stock price increase over the next few years [5] Investment Case - The investment case is supported by modest downside risk, attractive free cash flow, and the potential for quick upside as the market recognizes LGN post-IPO [5] - Even under slower growth conditions, EBITDA expansion and recurring maintenance services provide a resilient floor for the company [5]